Last Year Swensen Corp

question 79

Multiple Choice

Last year Swensen Corp.had sales of $303, 225, operating costs of $267, 500, and year-end assets of $195, 000.The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%.The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio.Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant.By how much would the ROE change in response to the change in the capital structure?

• A) 2.08%
• B) 2.32%
• C) 2.57%
• D) 2.86%
• E) 3.14%

---

Definitions:

Implicit Memory

Unconscious memory: subjects can demonstrate knowledge, such as a skill, conditioned response, or recall of events on prompting but cannot explicitly retrieve the information.

Verbal Tasks

Cognitive tasks involving language, such as speaking, reading, and writing, used to assess linguistic skills and brain function.

Motor Tasks

Activities that require the brain to plan and execute movements, often involving coordination and strength.